[04:04] So Patrick, thank you so much for coming to make some time to be on the show. It is a pleasure to have you here. So, you started your career on Wall Street, and you took what wouldn’t consider to be the pretty traditional career path. And then you went and departed radically in a different career that involved part-time entrepreneurship. So why did you do that? Because I don’t think too many people—maybe do that.
- Yes, it was not the plan. The plan was to go to Wall Street and stay on Wall Street and be some finance master, the universe tech guy. But the world conspired, Wall Street didn’t want me apparently. It kicked me out because it just, I had like three different times that I worked in jobs on Wall Street where like my group was eliminated. And the last one, which was the final straw was I was working at a division of AIG and their private equity and venture capital division in 2008 when AIG blew up. And I remember just thinking to myself, I have done everything the right way. I got the Harvard MBA, I worked at J.P. Morgan, I’ve done all the stuff you’re supposed to do. And it all blew up, my stock fell 97%. And I just was done. I was like this is it. If I haven’t gotten the message by now, it’s time to get out of here. And so that was what brought this on this decision. But of course, figuring out how to actually build the path beyond that was the challenging part.
[05:29] So obviously, you’re not the first person that some experience similar that has happened to. And a lot of times, you know, afterwards, you’re left with this feeling of overwhelm and fear and uncertainty. And it’s not a happy place to be when that happens to you. And so in your case, you decided to—I think, take a slightly different approach with this 10% entrepreneur approach. Why don’t you tell us? What is that? And what does it mean? And how does it play out? And hopefully, some folks listening might be able to apply it in their own lives.
- Yes. So basically, I’m sitting there after the financial crisis. And I’m watching all my friends out in Silicon Valley. The financial crisis never went to Silicon Valley. The entrepreneurship just kept booming. And so I was sort of like, “Wow, I’ve chosen the wrong path here. Maybe I should be an entrepreneur.”
But, I was afraid of entrepreneurship. The idea of being a full time entrepreneur—number one didn’t have a good idea. Number two, I’m pretty risk averse, less so now than I used to be, but very risk averse at the time. And I just didn’t see myself as a full time entrepreneur. But I started to notice that some people I knew were becoming investors in companies like an angel investor, or that they were giving their time, you know, as a startup advisor in exchange for stock in a company. And so I thought, “That’s interesting. What if I were to integrate entrepreneurship into my life, partially.” You know, in a part time manner as a way to create some upside, because I had started doing like consulting work. And you know, that’s—freelancing is great in terms of paying the bills, but you don’t generate wealth because you own none of the things you create.
So that’s what I started to do. I started to invest 10% of my time, and money in all these side ventures, and that was eight years ago. I now have more than 20 different things that I’ve done—a very, very wide range of things that has become quite valuable. And in fact, I have two companies that I am a shareholder in that have become unicorns. And I’ve had a lot of fun with it. And it’s just transformed the way I build my career.
And so I decided to write a book about this, five years ago. And when it came out, a lot of people said to me, “Patrick, you know, yes, the financial crisis was terrible, but that we’ll never have another one of those. You don’t need to worry. You’re so fixated on. 2008 and your sort of response to it to do this, it’s time to move on.” And frankly, unfortunately, this year, has just shown that the idea makes sense even more in this pandemic because careers are so unstable. And frankly, I have to tell you, like one thing that I’ve learned this year. This year have been a lot of learning from all of us, is—my approach works. My 10% is thriving. Even though traditional careers are getting blown up all over the place. So this strategy actually works in good times and in bad.
[08:18] I like it for a lot of reasons. The thing that—one of the things I don’t like about corporate America—there’s a lot of things I don’t like about corporate America. But one of the things I don’t like is it teaches you to be dependent on a single source of income. And then they own you, because they know that once they cut that paycheck off, most people don’t have any savings, and they’re in deep doo doo. Your 10% approach, to me seems like the risk averse person’s way of creating secondary streams of income for themselves, would that be a reasonably accurate assessment from someone who hasn’t read your book yet?
- That’s right. And with one important distinction, which is that, there’s a lot of these sort of strategies around passive income. And that’s great! And, love that. But this is really about more than that. It’s about becoming a shareholder in as many things as you can. Either you’re running those things as a side business, or you’re investing or being an advisor getting shares in other people’s companies.
And the idea is that all of the—it’s all about the ownership. And so you know, people talk about side hustles. And, you know, doing freelancing, that is not what we’re talking about here. This is about ownership and things that can grow. And if theoretically, you could eventually sell, and that’s the play. That’s really what it’s about. But you’re absolutely right. I mean, I’m super risk averse. And I do a ton of this.
[09:45] So let’s give an example so that people can really sink their teeth into this. And I have one that comes to mind. And you can tell me—we’ll play like on two entrepreneurs sitting at a table and poking holes in the idea. So everyone who listens to my show knows that I love standard operating procedures. And I like, I love hiring Non-US labor because it comes at a fraction of the cost of US labor. I also know—I was actually speaking to Cameron Herold, earlier this morning, because he’s coming on the show in a while. And you know, one of the things that Cameron said he said, “Most companies, they don’t know about the whole utility of overseas labor. They’re just not—it’s not even on their radar screen. They think about hiring somebody. And they think about hiring an American because they’re in America.”
So as a way to create one of these 10% opportunities. What if somebody said, “Hey, you know, I’m really good at documenting processes. It’s something that can be done on a part-time basis in my evenings.” And then I go to a company and I say, “Okay, here’s my thing. I’m going to help you to document all of your scaling processes. And then I’m going to help you to make sure that you hire Non-US labor to use those processes to execute growth at a fraction of the cost of what it would cost you in a traditional way. And in return for that I want 10% of your company or something like that.” Is that—do you think that that would be? Is that a great example? And if not, what’s wrong with it? And what’s good about it? Let’s, let’s hear your thoughts.
- Yeah, it’s a great example. And that’s kind of the advisor role, which is you’re getting sweat equity, right? And so, by the way, I share your view, talent is borderless. And in fact, my team that helps me with all my things is in Latin America because I also need bilingual skills. And so it’s very natural not just because the talent’s great, but because there’s things that you can get overseas that you may not have easy access to in the States, right? And so that’s a great example.
One of the favorite examples that I give is, you know, investing in companies is great. And certainly, if you have the capital, do that. It’s a wonderful way to do 10 percents. But when I was getting started, I was very afraid of that still. And so I actually became an advisor to a company where the CEO needed my advice on all kinds of different strategic issues. And with raising capital and stuff like that, I would give him an hour a month, and I would meet with the CFO an hour a month, and he gave me a half a percentage of the company that vested over two years, and then you know, our relationship ended. Now we’re still friends, but I don’t work with them. And that business has gone on to—they just raised millions of dollars of equity. So like, I can see the trajectory of my equity, gaining value over time. And so that’s really critical. What you’ve talked about is exactly right, with the idea, of course, that someday you want to be able to exit that position and not just have 10% of a company and not monetize it.
[12:35] Yes. So you’d have to be careful, you’d have to be diligent in your selection process, to know that the current ownership wants to exit the company within an appropriate period of time that would be agreeable to you for the time that you’re going to invest in doing whatever you’re going to do for them.
- Yes, either that or they’re gonna pay you dividends. I have another company, I’m a shareholder in that, they do give dividends every—they’re not looking to sell. But there is— the idea is you want it. You can’t eat stock certificates, right? You have to eat whatever they generate.
[13:08] Yes, that’s a good point. All right. So what other ways, aside from the example that I’ve given earlier, a few more examples that you can share with us? For people who are listening or thinking, “Yes, I kind of like this idea. But give me some more ideas.”
- Yes, so listen, one of the really cool things about 10% entrepreneurship is it can be the gateway drug, as it were to full time entrepreneurship. And so for folks who say, “Listen, I have an idea that I want to explore.” I’ll give you an example.
One of my favorite examples from the book and from life is a friend of mine called Luke Holden. And now Luke Holden, like me, is from the State of Maine. And he was working in finance in a bank. And you know, he was like, “This is not what I want to do for a living, but you know, I need the money. I’m paying off my student loans.” On the side, he had grown up fishing for lobster off the coast of Maine. And so he understood the supply chain of the seafood industry. And he also noticed that in New York City, all the lobster rolls are like 45 bucks, right? Which is ridiculous, because lobster roll is meant to be eaten, you know. It’s not supposed to be some luxury good.
And so he said, “Why don’t I create a fast casual concept around lobster rolls.” He developed this idea in his free time on the weekends in the evenings. And then he found a business partner to work with him. And so he kept his job. And he worked off this idea and actually launched the business while still working in banking because he couldn’t afford to quit. And it’s a great way to try out a business. And then if the business works, you can go full time.
And in fact, statistics show there’s a great study that was cited in Adam Grant’s book Originals that people who try business out part time and then go full time or 33% less likely to fail than people will just jump in straight away because they give themselves the runway to try an experiment. See if an idea even works even if they like being an entrepreneur before they jump in full time. And then maybe realize, “my idea doesn’t work. I don’t like doing this,” or whatever that is for you.
[15:05] Yes, that’s a very good point. So this approach versus the full time entrepreneur approach that I’m going to jump off, build my parachute on the way down, what are the some of the pros and cons of 10% versus full time?
- So listen, if you want to be a full time entrepreneur, I’m not going to stand in your way. I think it’s great. And frankly, that for many people is a great way to go. Although you can also be a 10 percenter, when you’re a full time entrepreneur, I call that 110% entrepreneur, because we’re using the same approach to diversify yourself right?
Now, the thing that 10% gives you, which you don’t get in traditional entrepreneurship—full time entrepreneurship—is the fact that you are diversified. You are really diversified. And that’s the thing. I’ve had so many of my friends are entrepreneurs. And, listen, it’s awesome. But like, number one, they are, they’re putting this huge bat in this one thing. And think about venture capitalists, they don’t do that. Venture capitalists have portfolios, and that’s why they sleep at night. And they don’t get to, sort of like, lose their hair at 30. Right. So that’s a big one. And the other thing is, you know, the life of an entrepreneur is not for everybody, it’s stressful. You have higher rates of divorce and depression among entrepreneurs in the general population. So it just may be that you’re just not—I don’t want to be a full time entrepreneur, like, I just can’t, I can’t see myself doing that. But I still want to be entrepreneurial. And so I’ve been able to create this diversified lifestyle that is much more sustainable for me.
And the final thing is, one thing we don’t talk about enough is the fact that a lot of entrepreneurs are able to become entrepreneurs, because they have money. They have family money, or they made money. And for all the good people out there who just can’t afford it, this is a great way to build your own on ramp without having to have capital to get going.
[16:58] Yes, and that is a very real challenge. If you don’t have the capital, then you’ve got to keep working. And then if you’re working, you’ve got family responsibilities, and so forth. And it’s tough, tough, tough, tough to juggle at all. I honestly don’t know if I would have been able to make the transition. If I hadn’t—in my case, I mean, I jumped off and built the parachute on the way down. And it was scary. And it’s not for everyone.
I remember being hundreds of thousands of dollars in debt, sitting at breakfast with my one angel investor in my first company on Saturday morning, and I didn’t have any money to make payroll on Monday. And I already owed him like I already owed him and others like a couple 100 grand. And I survived, thankfully. And then ultimately got an exit but that was not a very fun time.
[17:51] All right.
- And that’s the thing. I was just going to say that’s the thing is that entrepreneurship is glamorized by the media, like that story has a happy ending. But there are so many stories like yours, where the ending isn’t happy. And people talk about that, right? But that is reality. So listen, if you can handle that, go for it. But me and many people like me, were not ready.
[18:11] Yes. And to be clear, I mean, I don’t want to take all the credit of that individual. His name is John, and l I still talk to him to this day, 20 years later. If he didn’t lend me more money, then my whole life probably would have been different. I probably would have still been an employee because I would have gone bankrupt, because I couldn’t have made payroll. Maybe I would have figured out some other way to do it. I don’t know, I only had like two days to do it. And it would have been a very unhappy ending. And that would have been—that would have been a rough go. So thank you, John. If you’re listening, I’m sure he isn’t because he doesn’t. I don’t think he listens to my podcast. What if he does? Thank you, John. Yes. Indeed.
So what are some of the—we hear ideas and we think, “Oh, that’s really great. I want to get started.” But there’s and then there’s obstacles that we don’t see. So maybe you can shed some light on that? What are some of the obstacles to getting started with this approach? And then how do you overcome the,?
- So that I think the big obstacles which are completely achievable and to overcome. Well, there’s—I’m going to give you four today. The first is thinking you don’t have time. The second is thinking you don’t have enough money. And the third is not thinking carefully about what you’re good at, and what you’d like to do because the combination of the two is where you will find your area of success.
So the obstacle is just basically sitting down and doing the work. You need to figure out how much time, how much money you can allocate. And then where your skills and your interests lie? And a lot of people struggle with that. And I get that. I talked to audiences all the time, very intelligent people who say to me, “Hey, you know I’m not really sure, like what I’m good at.” And I think the thing is we forget. Because say you work in a bank, right? And you’re on your Excel jockey, you’re on Excel all day long. Like, you may forget that, like, if you were to walk across the street, nobody knows how to use Excel. It’s a very valuable skill set—or make a PowerPoint. But we forget there are certain things that we do. They’re super valuable to entrepreneurial ventures. So those are that’s that.
The other thing that’s a barrier is figuring out how to deal with your day job in terms of—if your employer doesn’t have policies, for example, like what’s allowed, what’s not allowed, how should you behave. And I have a very strong view on this. I think 10% entrepreneurs are a boon to the workforce. But your employer, you need to figure out how you can operate without violating any rules so that takes some work as well.
[20:44] Although in this particular era, when we’re in the middle of a worldwide pandemic, and so many people are working from home. I mean, talk about an opportunity to be able to juggle two things, because at the end of the day, as long as you’re getting your work done for your employer, like all of my employees are remote. Do I check to make sure they’re all working eight hours every day? No, I just expect that they get the work done. And as they get the work done, if they only work seven hours that day, I don’t really care about it that much.
So I say that only because I think this is an excellent opportunity for somebody who’s working from home, for their employer, to maybe be able to create a little extra time and get up earlier in the morning or whatever, or be more productive, to be able to invest some of that time in your side project.
- Totally agree. And I would argue also, first of all, I love that you’re confident about. Because if a confident business people don’t worry about this stuff, they just want their employees to do their work. But the other thing is, it’s a real retention tool. If your employees have the flexibility to do what they really want to do when they’re part time, and they value their day jobs so much more, because the day job is the route to flexibility that allows them to explore their passion. So I think that’s a really smart way to think about it.
[22:02] So now that you have hindsight to your benefit, what are some of the things—if you were giving advice to your younger self, you’re more or less-experienced self—what are some of the pearls of wisdom that you would pass along with respect to taking this approach?
- Yes, I think the thing that I would tell myself, the most important thing is in the beginning—well, there’s two things. Number one is, I thought in the beginning, somehow this would be, like, quick. Like, oh, “I’ll make some angel investments. And then like, next year, I’ll be cashing out.” No. Actually, it takes a long time. So I have—as I told you, I have two companies in my portfolio that have become really valuable, they’re worth more than a billion dollars. And I invested in these companies when they were little startups, right? So a lot of money there for me, but worrying you’re eight on both of them. So you got to be patient. This is not something you do for a year or two. This is a lifestyle that you embrace and take everywhere with you think that’s number one.
Number two is, I didn’t realize how—finding the first one is pretty hard. Because I think you’re it’s kind of like you’re so picky that you just want to find the perfect thing. And that’s my whole second book is about, of course. But once you find that first one, it becomes a great conduit to many more like it’s much easier to find the other one. So be—you want to be rigorous, but especially when you’re an advisor, and you’re not putting capital at stake, like take some risk. There’s really—you have no downside to taking risk.
[23:40] So how about this for an approach to get started? Because I’ve coached so many new entrepreneurs, I know how stuck they get with, what do I do first? So you have an expertise in something, why not just start writing about it on your LinkedIn profile? And then making connection requests, and making connection requests, and making connection requests, and engaging in dialog with people who you think might be in whatever target market you think you could add value to. And then you’ve got this ever increasing body of content that demonstrates your expertise.
That’s an easy action to take. There’s no real financial risk to it. You just got to sit at your keyboard and write and then put some time into it. Would there be a better way, Patrick, that you could suggest for someone who’s listening to this thinking? “Okay, I’m ready to start with a little baby step. But what do I do?”
- I think that’s a great way to go. And in fact, you know, it’s sort of like what I always tell people pre-pandemic was, go to the conference. Go meet with people who you’re interested with. And so LinkedIn is such a powerful tool, as we all know. And it’s a great place to build a repository of knowledge. And it’s where people start to recognize you that you’re—I hate the word thought leadership, but that’s kind of what it is.
And what I would say is to get to that point, though Trent. The first step is to figure out like, “What do I want? What do I want to be my topic of expertise?” And so think—what I did to figure that out for myself was I wrote a very detailed bio, everything I’ve ever done. And then I looked for the patterns. And I said, “Where are the areas that I’m different, that are my unique selling propositions? And then what are the things I love,” because it’s that combination. What you’re good at will make you reputable, what you love will get you out of bed in the morning and get you on that LinkedIn page and get you writing about the topic, right. So it’s really that power alley where you want to operate.
[25:36] And I love earlier that you mentioned that spreadsheet expertise. And I’m calling that out again, for the simple reason that I want to remind people listening to this. There’s stuff that you’re really good at that you totally take for granted, because it is so easy for you to do. And that—whatever that is maybe wildly valuable to other people in the marketplace. And because you take it for granted, you might not even be thinking about it.
But I would encourage that you take an inventory of the skills and experience that you have. And then just start to ask people, “Hey, is this skill? Do you have that in your company? Is this good? Is this valuable?” And start to use those in conversations, to start to learn. So you convince yourself that, “Oh, wow, this thing I’m actually really good at that I totally take for granted is hugely valuable to other people.” And that’s how you can find your area of expertise that maybe you’re going to start writing about.
All right, so for people who want to get any of your books, I’m assuming if they just type your name in Amazon, they’re gonna find your books, right?
- They will. But well, here they are. They’re actually sitting right here. This is not planned out. But here they are. They’re also audiobooks, of course in Kindles and so you can find them or go to my website, patrickmcginnis.com. It has everything as well.
[27:00] All right. Patrick, it was an absolute pleasure to have you on the show. Thank you very much for making some time.
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